5.5 Forecasting and managing cash flows

In this chapter you will examine :

• difference between cash and profits 

• the need to hold a suitable level of cash within a business, and the consequences of not doing so 

• uses of cash flow forecasts 

• construction of cash flow forecasts, including recognising the uncertainty of cash flows 

• interpretation of simple cash flow forecasts from given data 

• amendment of cash flow forecasts in the light of changes in business circumstances

• how reducing costs or improving the management of trade receivables and trade payables can improve cash flow 

• further methods of improving cash flows: debt factoring, sale and leaseback, leasing, hire purchase 

• recognition of situations in which the various methods of improving cash flow can be used